This is the first of the three courses part of the Globalization, Economic Growth and Stability Specialization. This course will employ a non-technical approach to analyze how governments use policy to influence a country's economy. Upon completing the course you should be able to discuss national debts and deficits, examine fiscal and monetary policy and their appropriateness to the situation of an economy, and anticipate the results of fiscal and monetary policies and structural reform on a country. These concepts will give you the tools to develop your own position in many current economic debates, such as fiscal stimulus vs. austerity, the merits of quantitative easing, the need for higher interest rates or the future growth path of many modern economies.

You are now in the last module of our Understanding Economic Policymaking course! Having reviewed the theory behind economic policymaking, we devote the last module to discovering what policymakers are actually doing in the leading developed countries of the world. We will discuss whether interest rates have been appropriate in a group of countries, and what the consequences are if they are not. We will also discuss quantitative easing, the main “unconventional” monetary policy, and anticipate some of its consequences. We will have a look at deficits and debt in some countries and use the tools to determine whether they are problematic; we will analyze the “austerity” policies applied in many European countries; and we will have a look at the combination of fiscal, monetary and structural policies being used in Japan, dubbed “Abenomics”. We´ll also consider the perils of policymakers´ aggressive pursuit of growth at a time when it is becoming more elusive. The final exam will have questions from this module and from each of the previous modules, so you can study your earlier quizzes to prepare. Good luck as you complete the course! I´ve enjoyed getting to know you a little. Warm regards.

Impartido por:

Gayle Allard

Transcripción

[MUSIC] As we've gone through this course, one thing you have noticed is that we talk about growth all the time, don't we? We talk about trying to get growth towards potential, that's our objective. So, the idea is not grow as much as you can, but of course we're looking for growth. And I'd like to close the course by thinking a bit about whether that's a reasonable objective, is it reasonable in today's world to be constantly pursuing growth? And we know that that's something that politicians like. Helps them to win elections. We know that's something that corporations like, that's a sign of success. We know that it's something we personally like. We see our incomes go up in times of growth, or we find it easier to get a job, but I think it's worth us asking ourselves whether for the world, as a whole, that's a reasonable objective. Of course, there are countries that need to move out of poverty, and for those countries growth is necessary. For the rest of the world, what about growth? Do we want to continue pursuing growth the way we have in the past? Or maybe a better way of framing the question, should we continue to pursue growth the way we have in the past, and can we even pursue growth the way we have for so many years? If you look at history and you look at the growth rates of the 20th century, they were completely off the charts. There's nothing in human history, at least in history that we have recorded and that we're aware of to compare with the growth rates in GDP in nominal terms, in real terms, and in per capita terms that we observed in the 20th century. There were also economic miracles like nothing that we are aware had happened in the past. The economic miracle in Japan, in Spain itself, in China, the Asian tigers. Countries that grew very fast for a relatively long period of time. So, I think it's worth asking ourselves whether we should continue pursuing these kinds of growth rates as a policy objective. Now, if you look at this chart, you'll see that many countries are not able to grow the way they used to. You look at the figures in this chart, and you see a group of countries, a group of developed countries, and you look at their growth rates all the way back from the 60s. And look at the trend. Look at how they are all converging to a much lower level. The first chart shows nominal growth, so there's no adjustment made for inflation. And you can see the sharp drop there. But the second chart, which shows you real growth, where we've actually taken the inflation, in some cases the deflation out of the figures, we see them converging to a much, much lower level. And some are negative. So, we know that growth is needed to bring people out of poverty. Growth in developed countries would sure make it a lot easier to continue keeping our social programs financed, to continue paying pensions in an aging society, but we should be careful not to shoot too high. In fact, if we look at some of the policies we've discussed here, look at quantitative easing, where now four major groups of countries, or what we call the G4, have all done quantitative easing in an effort to get growth started with new measures, because the old ones weren't working anymore. And in some cases, we've seen results, but if we look at Japan, we have to wonder whether quantitative easing has done something and what will be the result of so much monetary expansion? If we look at fiscal policy, we also see that world debt is higher than it ever was. We passed the 100 trillion mark early in 2015. How much more could we expand fiscal policy with debt levels that high? And what do we do to get out of them? What does Japan do to get out of a debt that is above 240% of GDP? What does Greece do to get out of its very high debt? And obviously, when debt levels are this high, we have to ask ourselves whether we can continue to use fiscal policy to stimulate the economy. So, going forward, I think we're gonna have to find a new paradigm. I'm not sure what it is, just a few things to keep in mind. We do have a lot of research showing that more income does not necessarily make people happier past a certain point. So, the question that we need to ask ourselves is, are we barking up the wrong tree? We know growth is good for some things. It's certainly popular. But maybe this blind pursuit of growth, whatever the cost, is something we have to rethink and approach differently in the future. So it's an underlying question. It's a deep question. I hope you'll keep it in mind as we move into a world of more scarce resources, of a very high population, where growth is getting more and more difficult to achieve. [MUSIC]